Dutch courts on the COVID-19 crisis and the doctrines of unforeseen circumstances and force majeure in commercial contracts
Since the end of April 2020 Dutch courts (all in summary proceedings) have rendered nine decisions that deal with the the influence of the COVID-19 pandemic on commercial contracts under Dutch law. All cases have been published in Dutch, except one case of the Netherlands Commercial Court (NCC) of 29 April 2020, ECLI:NL:RBAMS:2020:2406 that is published in English (on www.rechtspraak.nl). The NCC is a chamber within the District Court of Amsterdam where the entire proceedings are conducted in English (including submissions, hearings and the decision itself).
In this contribution I will provide a brief overview of the lessons that in my opinion can be learned from the first court decisions regarding the application of the doctrines of unforeseen circumstances (hardship)(Article 6:258 Dutch Civil Code, ‘DCC’) and force majeure (Article 6:75 DCC) on commercial contracts in the context of the COVID-9 pandemic.
2. Unforeseen circumstances (Art. 6:258 DCC) v frustration under English law
2.1 Unforeseen circumstances under Dutch law (Art. 6:258 DCC)
Like many other civil law systems, Dutch contract law contains a statutory provision (Art. 6:258 DCC) that sees at the effect of unforeseen circumstances which appeared after the contract has been concluded and that are of such a nature that the unmodified continuation of the contract may not reasonably expected by the other party. In that case the aggrieved party may request the court to modify or (partially) terminate the contract. A partial termination may include a reduction of an obligation to deliver goods or a price reduction.
The burden of proof that the doctrine of unforeseen circumstances is applicable rests upon the party that claims modification or termination of the contract on the basis of unforeseen circumstances. This is a high standard. See in a COVID-19 case District Court (summary proceedings) 29 May 2020, ECLI:NL:RBGEL:2020:2768 (Vitesse/Gelredome)(par. 4.4): the aggrieved party did not sufficiently show its alleged financial losses as a consequence of the governmental lockdown of a soccer stadium and therefore its reliance on the doctrine of unforeseen circumstances is denied.
A modification or termination on the basis of unforeseen circumstances can only be obtained in court. This may be awarded with retroactive effect. The retroactive effect may lead to the result that where originally a breach must be accepted, the breach is healed because of a modification of an obligation.
Art. 6:258 BW is mandatory law and cannot be excluded contractually.
It has been accepted that in case of unforeseen circumstances the parties have to act according to reasonableness and fairness to find a joint solution. See District Court Overijssel (summary proceeding) 3 June 2020, ECLI:NL:RBOVE:2020:1906 (X/Urbana)(par. 6.3)
Where a procedure on the merits in first instance (District Court) may take more than a year and appeal to a Court of Appeal and subsequently the Dutch Supreme Court can follow as well, it is interesting to see that case law shows that summary proceedings are available and that judges, bases on a preliminary view, are willing to take appropriate measures (for the time a procedure on the merits will last). All COVID-19 cases discussed here are judgements in summary proceedings (where injunctive relief may be claimed, which includes in the Netherlands a claim for specific performance or payment).
2.2 Frustration under English law
Frustration of a contract is accepted where, without fault of either party, the contract has become “incapable of being performed because the circumstances in which performance is called would render it a thing radically different from that which was undertaken by the contract.” (Davis Contractors v Fareham Urban District Council  AC 696, 728). See more recently Edwinton Commercial Corp v Tsavliris Russ (Worldwide Salvage & Towage) (“The Sea Angel”) EWCA Civ 547 (at 111). The doctrine of frustration applies particularly where performance by a supervening event (after the conclusion of the contract) has become impossible or illegal (e.g. where performance would violate governmental rules in respect of COVID-19). Contrary to the doctrine of unforeseen circumstances under Dutch law, frustration will generally not be accepted if performance became more onerous or if the value of the performance has diminished significantly (see Ocean Tramp Tankers Corp v V/O Sovfracht (‘The Eugenia’)  2 QB 26, 239). A delay in performance will only amount to frustration if it is sufficiently abnormal in its cause, effect or expected duration. See Blankley v Central Manchester Children’s University Hospitals NHS Trust  EWHC 168 at 40).
The effect of frustration is the automatic discharge of the parties from their future obligations under the contract. No court decision is needed. The only remedy on the basis of frustration is discharge. Modification of the contracts cannot be obtained by relying upon frustration. The Law Reform (Frustrated Contracts) Act 1943 is concerned about the recovery of benefits conferred prior to discharge.
All in all, frustration under English law is a doctrine that has a far more limited scope and effect than the doctrine of unforeseen circumstances under Dutch law. The key differences are:
(i) Frustration has a much narrower scope of application than unforeseen circumstances. In particular where the costs of performance for the debtor or the value of the performance for the creditor have significantly deteriorated frustration under English law may generally not be applied in contrast to the doctrine of unforeseen circumstances under Dutch law.
(ii) Frustration leads to the discharge of the contract by operation of law as opposed to unforeseen circumstances and its consequence that can only be accepted in a court decision.
(iii) The effect of frustration is only that the contract is discharged, as opposed to the consequences of unforeseen circumstances where the court may accept a wide array of consequences such as the (partial) modification of the contract, the (partial) termination of the contract and the (partial) suspension of the contract.
Given the very limited application of frustration as a safety valve under English law, in serious situations of unforeseen circumstances such as the COVID-19 crisis, one can understand that the Cabinet Office on 7 May 2020 published a ‘Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency’ asking contracting parties to act responsibly and fairly towards each other in performing and enforcing contracts in the national interest.
3. COVID-19 and unforeseen circumstances in Dutch case law
The application of the Dutch doctrine of unforeseen circumstance (Art. 6:258 DCC) contains the following elements:
(i) An unforeseen circumstance occurred.
(ii) An unaltered continuation of the contract cannot reasonably be expected.
(iii) The unforeseen event will not be for the account of the party relying on the doctrine of unforeseen circumstances, pursuant to the nature of the contract or prevailing general views in society (“verkeersopvattingen”).
(iv) The specific modification or termination of the contract by the court.
I will briefly touch upon all elements below and discuss the recent case law in that context.
4. An ‘unforeseen circumstance’ occurred (i)
The element ‘unforeseen circumstance’ has got not so much to do with the foreseeability of the circumstance, but rather whether the relevant circumstance (that must have occurred after the conclusion of the contract) has been accounted for (expressly or tacitly) in the contract. That is an issue of contract interpretation. The mere fact that from a historical perspective pandemics have occurred (such as the Black Plague, the Spanish flu) and will occur every now and then is as such foreseeable but not relevant. The relevant question is whether the parties have provided for the occurrence of a pandemic (such as COVID-19) and/or the government regulations as a consequence of it (such as the varieties of a ‘lock down’) in their contract. If not, the COVID-19 pandemic and/or the governmental regulations are ‘unforeseen circumstances’ in the sense of Article 6:258 DCC. Nevertheless, the foreseeability of a circumstance can be relevant. If a circumstance is readily foreseeable it may reasonably be implied that the parties have provided for that circumstance in the contract.
In general Dutch courts accept that the COVID-19 crisis and the governmental measures taken to contain it (e.g. the lock downs) were not taken into account in the contracts and qualify as such as ‘unforeseen circumstances’ as meant in Art. 6:258 DCC. See, all in summary proceedings, District Court Amsterdam 20 May 2020, ECLI:NL:RBAMS:2020:2647 (Coltavast/Metroprop)(par. 4.7), District Court Noord-Nederland 27 May 2020, ECLI:NL:RBNNE:2020:1979 (Sigismund/InBev)(par. 4.8, end), District Court 29 May 2020, EVCLI:NL:RBGEL:2020:2768 (Vitesse/Gelredome)(par. 4.1), and District Court Amsterdam 11 June 2020, ECLI:NL:RBAMS:2020:2914 (Restaurant Red Light District)(par. 3.5).
An unforeseen circumstance can only be a future event: a circumstance that occurred after the contract has been concluded and that has not been provided for in the contract (explicitly or implicitly). In an M&A-transaction where the parties during the negotiations of the SPA (on 26 and 27 February 2020) have spoken about the COVID-19 pandemic and have agreed not to add a Material Adverse Change clause or a specific corona clause in the SPA, the Amsterdam District Court in summary proceedings ruled that the COVID-19 pandemic has been accounted for in the contract (in the sense that this risk is accepted). See District Court Amsterdam 14 My 2020, ECLI:NL:RBAMS:2020:2644 (Everts c.s./Nordian Fund)(par. 4.17).
In District Court Amsterdam (summary proceedings) 19 June 2020, ECLI:NL:RBAMS:2020:3091 (Care/Vision)(par. 5.12 and 5.14) the Court gave a similar decision. Also in an M&A-transaction, the seller and purchaser concluded a letter of comfort and a sales agreement (in an asset/debt transaction) at the beginning of March 2020. The closing of the deal was envisaged for 1 April 2020. The purchaser opposed the closing and relied on unforeseen circumstances referring to the COVID-19 crisis. The court contemplated that around 1 and 2 March 2020 in Europe around 3,000 contaminations have been noted and 50 deceased and that the northern provinces of Italy were in lock down, that the World Health Organization declared the COVID-19 outbreak a pandemic on 11 March 2020 and that as of 17 March 2020 in the Netherlands schools have been closed followed by businesses, including the eye clinics of seller and purchaser (which reopened six weeks later on 29 April 2020). The court noted that the parties did not discuss the coronavirus during their negotiations and that the purchaser did not insist on incorporating a MAC-clause in the sale/purchase contract. The CEO of the purchaser even urged on 23 March 2020 to finalize the relevant agreements, to come back on this a day later relying, inter alia, on unforeseen circumstances not to close the deal. The court ruled that not the entire corona crisis qualified as a future event. The court decided (par. 5.15) that at the beginning of March 2020 it was not foreseeable what measures the Dutch government would take (such as the closure of businesses, including the businesses of the parties). Where a closing on 1 April 2020 would entail that the purchaser would receive a business that was forced to close and where the purchaser could not receive a financial contribution from the government, whereas the situation is different as of 29 April 2020 and the target company can materialize a decent turnover again, reasonableness and fairness entail that only the date of closing must be suspended from 1 April 2020 to 1 June 2020.
5. An unaltered continuation of the contract cannot reasonably be expected (ii)
Business certainty is key in Dutch contract law. See NCC 29 April 2020, ECLI: NL:RBAMS:2020:2406 (par. 3.25). The statutory provision on unforeseen circumstances needs to be applied very reservedly, the Dutch Supreme Court (DSC) ruled explicitly. See DSC 20 February 1998, NJ 1998/493 (Briljant Schreuders/ABP) and DSC 13 October 2017, ECLI:NL:HR:2017:2615 (Bronckhorst)(par. 3.3.4). The burden of proof for the application of Art. 6:258 DCC is high and rests upon the party claiming modification or termination of the contract on this ground.
In general three types of circumstances will give rise to the application of the provision on unforeseen circumstances (see NCC 29 April 2020, ECLI: NL:RBAMS:2020:2406, par. 3.27):
(i) The contractual equilibrium of the contract is severely disrupted, e.g. the costs of performance for the debtor have arisen significantly (e.g. machine parts could not be obtained in China due to the closing of factories but could only be bought at a substantial higher price in Europe) or the value of the performance for the creditor is decreased significantly (e.g. the right to have a billboard displayed in a soccer stadium while the soccer matches were all cancelled).
(ii) Where the purpose of the contract can no longer be achieved.
(iii) Where unaltered performance is extremely onerous for one of the parties (this situation nears the doctrine force majeure)
In NCC 29 April 2020, ECLI:NL:RBAMS:2020:2406 the court accepted that it was not unreasonable for the seller of a target company (an equestrian show jumping business) to demand full payment of a contractually agreed fixed fee of EUR 30 million (where the value of the transaction was EUR 169 million) allowing the intended purchaser to back out of an M&A-deal at will. The purchaser claimed mitigation of the fee in the light of the COVID-19 crisis (to the effect that the value of the target company diminished). According to the court, the aim of the fee is a risk allocation. The purchaser has the burden to pay a fixed amount of EUR 30 million for the benefit to quit the deal at its discretion. The seller has the benefit of receiving EUR 30 million but has the burden to be left with a target company whose value is diminished as a consequence of COVID-19.
6. The unforeseen event will not be for the account of the party relying on the doctrine of unforeseen circumstances, pursuant to the nature of the contract or prevailing general views in society (iii)
In District Court Overijssel (summary proceedings) 6 May 2020, ECLI:NL:RBOVE:2020:1688 (Enschede/Project developer) the municipality of Enschede claimed injunctive relief against a project developing company to have pieces of land transferred to the project developer on the basis of a sales agreement and to receive the purchase price in return. In its defence the project developer inter alia relied on the COVID-19 crisis as unforeseen circumstances. The court (in par. 4.9) rejected this argument because the nature of this contract entailed that the risk would be for the account of the project developer. The court interpreted the agreement in the way that the parties had agreed explicitly that the pieces of land would be transferred all at once, that alternatives would not be accepted and that the pieces of land would be developed for the account and risk of the project developer. The court added that the COVID-19 pandemic occurred after the project developer had already been in default, suggesting that this argument looks a bit cooked up.
In District Court Amsterdam (summary proceedings) 20 May 2020, ECLI:NL:RBAMS:2020:2647 (Coltavast/Metroprop) two professional real estate companies concluded a sales agreement with regard to two shops that were rented by retail businesses. The seller is claiming transfer of the properties and payment of the purchase price. The purchaser relied, inter alia, on unforeseen circumstances. The purchaser alleged it had difficulty in obtaining financing due to the COVID-19 crisis. The court ruled (par. 4.7) that the fact that the purchaser could not get financing is for the account of the purchaser as a professional party that did not insert a subject to financing clause in the contract.
The purchaser added that due to governmental restrictions because of COVID-19 the value of the object of the agreement (the rent to be paid by shops) have diminished substantially. The court rejected this argument. It ruled that no warranty with regard to exploitation possibilities or lease income had been added to the contract and that until the day of transfer the rent had been fully paid by the tenants. The court noted that it seems that the COVID-19 crisis is used by the purchaser to wiggle out of the transaction.
In Dutch case law the worldwide financial-economic crisis of 2008 has not been accepted as a reason to modify or terminate commercial contracts. In general, it has been held by Dutch courts that this crisis is to be considered an entrepreneurial risk and should as such stay for the account of the aggrieved party on the basis of prevailing general views in society (Art. 6:258 (2) DCC). See, inter alia, Court of Appeal ‘s-Hertogenbosch 30 May 2017, ECLI:GHSHE:2017:2299 (par. 6.5.7).
In recent case law about the COVID-19 crisis it has been held that the COVID-19 crisis cannot be compared to the financial-economic crisis of 2018, given the magnitude and duration of the national and international governmental regulations (lockdowns) aimed to combat the COVID-19 virus. The COVID-19 pandemic and the governmental regulations (lock downs) are not considered to be for the risk of the aggrieved party on the basis of the nature of the contract or prevailing general views in society. See District Court (summary proceedings) 29 May 2020, EVCLI:NL:RBGEL:2020:2768 (Vitesse/Gelredome)(par. 4.1) and District Court Amsterdam 11 June 2020, ECLI:NL:RBAMS:2020:2914 (Restaurant Red Light District)(par. 3.5).
In District Court Amsterdam 11 June 2020, ECLI:NL:RBAMS:2020:2914 (Restaurant Red Light District)(par. 3.6) it was also held that a disappointing number of visitors of a business premise (like a restaurant, or a shop), that will regularly be for the account of a tenant as a business risk on the basis of prevailing general views in society (DSC 1 February 2008, ECLI:NL:HR:2008:BB8098), will not be for the account of the tenant if the disappointing number of visitors have been caused by governmental COVID-19 regulations (lock down). District Court Overijssel 3 June 2020, ECLI:NL:RBOVE:2020:1906 (X/Urbana)(par. 6.2) held differently (the disappointing number of visitors for a restaurant due to COVID-19 related governmental regulations is for the account of the tenant of the restaurant) but I consider this decision not correct in that respect.
7. Modification or termination of the contract by the court (iv)
The guiding star for every modification or (partial) termination by the court is the initial risk allocation in the contract. The aim of the application of Art. 6:258 DCC is that the contractual equilibrium must be restored. This means that a bad deal may not be modified into a better deal on the basis of the doctrine of unforeseen circumstances. The NCC has expressed that view eloquently in its decision of 29 April 2020, ECLI: NL:RBAMS:2020:2406 (par. 3.25 and 3.26), referring to Legislative history, Book 6, p. 970 and 974:
“3.25 (…) The courts should craft a solution that is as close as possible to what the parties bargained for in their initial deal and to the risk allocation that was inherent in that deal.16 A significant factor in the analysis is whether the current challenges are the same as, or similar to, the things that the parties dealt with in their agreement.
3.26 The legislative history on Article 258 provides guidance on how the courts should assess what the appropriate solution may be:
‘Few general rules can be stated as to how the court should intervene if it determines that the contract cannot be enforced in its current form. The court should state in concrete terms what good faith and fairness mean in the parties’ specific relationship. One of the most significant factors in this analysis is that the parties entered into an agreement that has a certain substance. The court should consider the parties’ intent and the contract’s purpose as much as possible. This may mean, for example, that the disadvantaged party, where there is a severe disruption of the equilibrium of value between the parties’ respective obligations, may seek an adjustment of its obligations, but may also have to bear a certain share of the risk; on the other hand, the court should consider particular value judgements made by the parties in the original agreement regarding their respective obligations, if inconsistent with fair market value at the time.’”
In District Court (summary proceedings) 29 May 2020, EVCLI:NL:RBGEL:2020:2768 (Vitesse/Gelredome)(par. 4.3) the court ruled that in respect of requested modification of a contract by the court (should a lease price of a soccer stadium be lowered as a consequence of COVID-19 measures where the stadium is closed until 1 September 2020?) regard must be had to the position in society of and the relation between the parties, the nature and seriousness of the interests involved (such as the amount of loss for the soccer club as a consequence of the COVID-19 crisis, its financial position before the corona crisis started and to what extent the lessor is dependent on the lease price, for example for its own financing obligations).
8. Modification by the court (iv): ‘share the pain’ embraced by courts
In mid-March 2020 I suggested in an article on LinkedIn (“Commerciële contracten en corona: uitgangspunt 50/50 verdeling nadeel”, to be found on https://www.barentskrans.nl/nieuws/commerciele-contracten-en-corona-uitgangspunt-50-50-verdeling-nadeel/) that where the doctrine of unforeseen circumstances will apply to a COVID-19 situation, as a starting point the court may divide the risks as a consequence of COVID-19 and the following governmental regulations (the lock down) between the parties on a 50/50 basis. Where neither party is to blame for the occurrence of COVID-19 and/or the governmental regulations regarding COVID-19 it seems fair that the burden should not rest upon the shoulders of one party only but should be shared between the parties. However, I added that the parties’ intent and the contractual risk allocation in their original contract must be respected and preserved. If a party entered into an advantageous or disadvantageous deal, that advantage or disadvantage should be reflected in a disproportionate modification or termination. These factors may warrant an allocation that is not 50/50.
The suggested ‘share the pain’ approach has been applauded in legal writing (e.g. Prof. H. Schelhaas/Spanjaard, NJB 2020, p. 966-967, Maes/Den Hartog, Bb 2020, par. 4.2, and C. Drion, NJB 2020/1251).
The share the burden thought can also be found in Art. 6:111 Principles of European Contract Law, comment D: “the risks of unforeseen events are to be shared”.
In NCC 29 April 2020, ECLI: NL:RBAMS:2020:2406 the court agreed with the share the pain approach (see par. 3.42, 3.43 and 3.48):
“3.42 (…) [Claimant] emphasised a “share the pain” philosophy, relying on the Tjittes, Tjittes/Hogeterp and Schelhaas/Spanjaard articles referred to above. This philosophy focuses on the whole situation now, encompassing Tennor, [Claimant] and the target business. Its basic idea is that the parties are in it together and need to find a way out together. It stresses the parties’ contractual equilibrium in the LOI and the need to restore or preserve that equilibrium in any court-ordered solution in the current circumstances.
3.43. The Court, at this early stage and on a preliminary basis, rejects Tennor’s perspective and embraces [Claimant]’s philosophy. Articles 248 and 258 do not consider what either side would have bargained for or would have done if they had known about the unprovided-for circumstance much earlier. That is not the right question. Instead, what Articles 248 and 258 focus on, in relevant part, is whether or not it is unacceptable, under standards of reasonableness and fairness, for [Claimant] to demand strict performance of the fee obligation. Articles 248 and 258 consider the unprovided-for circumstance’s impact after contract formation. Once the issue is framed this way, the answer is clear: the “share the pain” approach, focusing on the parties’ contractual equilibrium, is the right way to look at the LOI in the specific circumstances in this case at this early stage. (…)
3.48 (…) the “share the pain” approach, as embraced by the Court.”
More recently, the share the pain idea has been fully embraced in clear wording by the Amsterdam District Court in summary proceedings in a case about the lease of a business premise. Due to governmental regulations with regard to COVID-19 the leased restaurant had to be closed on 15 March 2020. The restaurant could reopen on 1 June with restrictions (social distancing, limited number of guests). The tenant claimed in proceedings on the merits a discount on the lease price of 25% and a suspension of 25% until the governmental restrictions have been lifted or until he will be able to realise 70% of the turnover he had before the COVID-19 crisis started. In summary proceedings the landlord claimed full payment of the rent. The tenant relied in its defence inter alia on unforeseen circumstances (the COVID-19 pandemic and the consequential restrictive governmental regulations) to suspend 25% of the monthly rent. The District Court in summary proceedings accepted unforeseen circumstances and amended the lease contract provisionally (until a decision in the case on the merits has been rendered) in the sense that a 25% suspension of the lease price for six months is accepted. The court made this decision on the basis of the share the pain idea (par. 3.8, in my translation):
“The core of the doctrine of unforeseen circumstances is that there is a fundamental distortion of the equilibrium of the contract. The lessor is able to provide for the rented premises in fact, but this providing for lost every sense for the lessee because the rented premises cannot be exploited as a consequence of a defect that is for the risk of the lessor. The relationship between performance and the consideration in return became in disbalance. Restoration of the equilibrium can be reached if the judge on the basis of Art. 6:258 DCC modifies or terminates the agreement. Since none of the parties have contributed to causing the corona crisis it is not reasonable that the disadvantage will be transferred to the lessee to the full extent, but this must be shared between the parties. The fact that a defect exists underlines that the lessor cannot fully hold the lessee on to its obligation to pay the rent as long as the restrictions are in force. On the other hand, it would also not be reasonable in the given circumstances if the duty of the lessee to pay would be lowered to nil due to the absence of a benefit of the lease as a consequence of a defect. In principle it could be accepted as a reasonable guideline that the disadvantage must be divided equally between the parties, with the remark that in the assessment of it all circumstances of the case must be included, such as the position in society and the mutual relationship of the parties, and the nature and seriousness of the involved interests of both parties.”
9. Force majeure under Dutch law
The Dutch Civil Code includes a provision on force majeure (Article 6:75 DCC). For force majeure to apply, first the performance of an obligation must be temporarily or permanently impossible. Impossibility entails both absolute impossibility (e.g. a governmental COVID-19 regulation prohibiting a certain business) and practical impossibility. In case of practical impossibility performance of the obligation is possible but would require such far reaching (financial) offers of the debtor that it reasonably cannot be expected from the debtor to take these measures. Second, force majeure will not be accepted if the non-performance cannot be attributed to the debtor because of his fault or on the basis of statutory law, a contract (a warranty) or general prevailing views in society.
Force majeure under Dutch law is of relative importance. It only hinders to claim specific performance (one cannot claim what is impossible) or damages, but not (partial) termination (attributability of the breach is not required for termination, see Art. 6:265 DCC).
For example, where a buyer of specific pieces of land has a difficulty in obtaining financing for this purchase due to the COVID-19 crisis, the court denied force majeure in the sense of Article 6:75 DCC. The court held that transfer of ownership is not prohibited as such, and having insufficient financial funds for the purchase is for the account of the purchaser according to prevailing views in society. See District Court Amsterdam (summary proceedings) 20 May 2020, ECLI:NL:RBAMS:2020:2647 (Coltavast/Metroprop)(par. 4.4 and 4.5). Financial inability, even as a consequence of the COVID-19 crisis, will be for the account of the debtor and will not constitute force majeure. Payment as such is not forbidden by the governmental regulations regarding COVID-19. See District Court Overijssel (summary proceeding) 3 June 2020, ECLI:NL:RBOVE:2020:1906 (X/Urbana)(par. 6.1) and District Court Amsterdam 11 June 2020, ECLI:NL:RBAMS:2020:2914 (Restaurant Red Light District)(par. 3.4).
In that respect the reasoning in District Court (summary proceedings) 19 June 2020, ECLI:NL:RBAMS:2020:3091 (Care/Vision)(par. 5.9) seems a bit overcomplicated. Vision was the purchaser in an M&A-transaction to take over an eye clinic from Care. Vision pleaded force majeure, because it could not get financing due to the COVID-19 crisis. In my opinion, the short answer should be that a financial inability will be for the account of the purchaser on the basis of prevailing views in society and does not constitute force majeure. Nevertheless, the court assessed the arguments of the purchaser in this respect. The court decided that it is not likely that the buyer cannot obtain financing for the purchase. The purchaser did not show a rejection by a bank to obtain financing, around the same time the parent company of the purchaser concluded another million euros deal, and payment of the instalments of the purchase price that needed to be paid out of the cash flow of the target are ahead in the future (when the business of the target company could continue as of the end of April 2020). The court emphasized (par. 5.8) that contracts must be adhered to and that a situation where a party does not want to perform anymore because it is economically more profitable for it does not constitute force majeure.
It has been pleaded by Coen Drion (NJB 2020/761) that force majeure with regard to payment of a sum of money should be accepted more readily. It is unlikely that this interesting thought will be followed in court because it will seriously undermine our contracts and economic system.
10. The Dutch statutory provisions on unforeseen circumstances and force majeure
Art. 6:258 DCC (unforeseen circumstances)
“1. Upon request of either of the parties, the court may either modify the effects of a contract or set it aside in whole or in part, on the basis of unforeseen circumstances which are of such a nature that the other party, given those circumstances, cannot expect, in accordance with generally held standards of reasonableness and fairness, the unaltered contract to continue to be valid and enforceable. The court may grant such modification or setting aside a retroactive effect.
2. The court shall not grant modification or setting aside of any part of the agreement to the extent that the person invoking the circumstances is accountable for them pursuant to the very nature of the agreement or pursuant to generally accepted principles.“
Art. 6:75 DCC (force majeure)
“A failure in performance cannot be attributed to the obligor if it is neither due to his fault nor for his account pursuant to the law, a legal act or generally accepted principles.”
11. List of cases in Dutch courts (summary proceedings) regarding COVID-19 and commercial contracts
a. Netherlands Commercial Court 29 April 2020, ECLI:NL:RBAMS:2020:2406 (McCourt Global Sports and Media/Tennor)
b. District Court Overijssel 6 May 2020, ECLI:NL:RBOVE:2020:1688 (Enschede/X)
c. Vzr Rb Amsterdam 14 May 2020, ECLI:NL:RBAMS:2020:2644 (Everts c.s./Nordian Fund)
d. District Court Amsterdam 20 May 2020, ECLI:NL:RBAMS:2020:2647 (Coltavast/Metroprop)
e. District Court Noord-Nederland 27 May 2020, ECLI:NL:RBNNE:2020:1979 (Sigismund/InBev)
f. District Court Gelderland 29 May 2020, ECLI:NL:RBGEL:2020:2768 (Vitesse/Gelredome)
g. District Court Overijssel 3 June 2020, ECLI:NL:RBOVE:2020:1906 (X/Urbana)
h. District Court Amsterdam 11 June 2020, ECLI:NL:RBAMS:2020:2914 (Restaurant Red Light District)
i. District Court Amsterdam 19 June 2020, ECLI:NL:RBAMS:2020:3091 (Care/Vision)